Secured Homeowner Loans Guide

How Can a Low Cost Secured Loan Help?

A low cost secured loan can help with money management, funding a major purchase or consolidating debt. Find out how a secured homeowner loan works.

A secured homeowner loan involves providing the lender with collateral in order to borrow money. It is the preferred option for property owners who have either a poor credit rating and/or need to borrow more than would be possible with an unsecured personal loan. It can take longer to arrange a secured loan as a surveyor will normally be required to assess and value the property.

Secured Homeowner Loans and Available Home Equity

Although falling property prices and more restrictive lending practices have had a negative impact on the market in recent years, it is still possible to get a low cost secured loan provided that the customer has sufficient home equity available. It is possible to determine how much equity is available by subtracting any mortgages and secured loans from the value of the property.

Consolidating Debt with a Secured Homeowner Loan

Many homeowners choose to consolidate debt (credit cards, loans and unpaid bills) with a low cost secured loan. This not only helps to simplify family finances, but it can also make repayments more affordable. The danger is turning unsecured into secured debt as it gives the lender greater powers in the event of default. Those with a bad credit rating may wish to consider a debt free solution.

Borrowing Limit for a Low Cost Secured Loan

Should a customer have a bad credit rating, an unsecured loan won't be available. Whilst few unsecured products will allow someone to borrow in excess of £25,000, it may be possible to get a low cost secured loan for over £250,000. This is clearly subject to affordability and sufficient home equity.

Applying for the Cheapest Secured Loans

A secured homeowner loan will be most affordable when the customer has a good credit rating. The annual percentage rate will typically be in the 7-10% range. Whilst a low credit score won't rule out a loan secured on a property, it will be more expensive because the risk of the customer defaulting is much higher. A lot will depend upon how much equity is available and how bad the borrower's credit history is.

Defaulting on a Secured Homeowner Loan

Although a low cost secured loan allows the customer to borrow money more affordably, it involves putting up the family home as collateral. A change of personal circumstances, such as unemployment or poor health, could lead to financial difficulties. Should a family be unable to keep up with the repayment schedule and accrue arrears, the lender could go through the courts to repossess the property. If there is a repossession deficiency, this customer is responsible for its repayment for up to 12 years.

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